We present simple Cournot and Stackelberg models to study methods for protecting innovations from imitation. We find that policymakers should allow some imitation if innovation efficiency is low, even when imitation can be prohibited at no cost. Moreover, we demonstrate that social welfare in a monopoly can exceed that in the Cournot and Stackelberg duopoly, given relatively efficient innovation and a high degree of imitation. Therefore, where both innovation efficiency and degree of imitation are high, entry restrictions can be supported for social welfare.
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